What Are the Basics of Crypto Trading?

While crypto trading might sound mysterious, it's more popular than you think. It's one of the fastest-growing industries in the world, with an estimated 2.3 million users in the UK. Confidence keeps growing, and more people than ever are experimenting with Bitcoin, Ethereum and Tether. Curious? Keep reading as we explain the basics of crypto trading.

Understanding cryptocurrency

The first step towards a successful trading career is understanding how cryptocurrency works. It's a digital currency that uses cryptography for payments. Unlike traditional money, there's no regulatory authority. Instead, transactions are verified by a decentralised system.

Consequently, crypto trading is high-risk but potentially lucrative. If you can surf the volatile markets, predict price movements and stay up to date with the latest trends, you'll reap the rewards.

Opening and funding a trading account

Before diving in, you must open and fund a trading account. Search for the best cryptocurrency exchanges, such as Binance, Coinbase and Kraken. The process is similar to setting up a stock brokerage account and only takes a few minutes. Once you've filled in the necessary information and added funds to your digital wallet, you're ready to go!

Choosing a cryptocurrency

Now it's time for the big decision – choosing between different types of cryptocurrencies. There are more than 12,000 available, so how do you know which is best?

We suggest sticking to the most popular options, especially if you're a beginner. Bitcoin was the first-ever cryptocurrency and still boasts the largest market cap at over $435 billion. Ethereum is next, much-loved for its smart contract functionality. You could also explore:

• Tether

• Binance Coin

• XRP

• Cardano

• Solana

• Dogecoin

• Polkadot

Picking a strategy

The most successful traders pick and stick to a strategy. Otherwise, they're just stabbing in the dark and hoping for the best. Some of the main approaches include:

Arbitrage

Arbitrage doesn't make huge profits but guarantees consistent results. You take advantage of price discrepancies across markets in a short period of time. For instance, you might buy Ethereum through one exchange and then immediately sell it for more money in another.

Day trading

Day trading is pretty self-explanatory. You buy and sell cryptocurrencies on the same day to benefit from short-term price movements. However, timing the market takes years of expertise, so it might not be the most suitable strategy for beginners.

Scalping

Scalping is one of the most common strategies because it's simple and effective. It's similar to arbitrage, but you hold onto your investments for longer. Purchase a cryptocurrency, monitor its development and cash in when the trading price exceeds the buying price.

Buy-and-hold investing

Prefer to bide your time? Buy-and-hold investing might be for you. As the name suggests, you sit on your cryptocurrency for months or even years until there's a big market boom.

Keep learning

Above all else, the most crucial thing to remember is you're always a student. If you don't keep up to date with the latest news and trends, you'll quickly fall behind other traders.

Luckily, there are plenty of valuable resources out there to help you stay ahead of the curve, including guides like https://learncrypto.com/knowledge-base/how-to-trade-crypto/understanding-crypto-trading-volume. Here, you'll master the ins and outs of crypto trading volume to boost your chances of success.

Now you’ve mastered the basics, you should feel more confident investing your money. Keep coming back to this guide whenever you need a helpful reminder.